The letter was despatched from North Bloc earlier this month, shortly before withdrawal of support to the ruling coalition at the Centre by the AIADMK.

Union steel minister Naveen Patnaik had earlier sent a similar missive to the Russian minister for trade, but the initiative taken by the finance minister is particularly significant.

The Union steel ministry had circulated a Cabinet note on the joint venture proposal between the Steel Authority of India Limited (SAIL), of which Iisco is a subsidiary and Russian steel consultants, Tyazhpromexport (TPE), for upgrading the obsolete steelworks of Iisco. The exercise was a sequel to the Russians giving their assent to the venture at the Indo-Russian Joint Commission last year.

The commentsof the finance ministry to the note were awaited. The finance minister's reminder to the Russian government to formalise the protocol indicates North Block's support to the Cabinet note on the Iisco modernisation project.

The proposal involves allowing SAIL a waiver of some of its loans from the Steel Development Fund (SDF). SAIL needs the clean slate to be able to raise funds for modernising Iisco and the finance ministry is known to have had reservations about the concessions demanded by SAIL.

Incidentally, the finance ministry is mulling over another SAIL proposal for a financial restructuring, that would enable the company to convert nearly Rs 4,000 crore of its SDF loans into government equity. SAIL intends to plough some of that concession, roughly Rs 500 crore, into Iisco. There has been no word from the finance ministry on the SAIL restructuring plan so far.

The Rs 2200-crore Iisco modernisation project proposed by SAIL involves a concession from the Russian government as well. Tyazhpromexportintends to fund its portion of the equity contribution to Iisco from the trade balance, left over from the days of rupee-rouble trade.

The Russians have agreed at the Joint Commission to allow TPE to use part of the escrow account to pay for its share of the equity in Iisco and equipment supply to the project. The Steel Authority of India intends to have 51 per cent stake in the joint venture, while TPE will plough in the remaining 49 per cent of the equity.

The Russians may even be allowed to opt for a higher stake if they like. Meanwhile, the West Bengal government is known to have offered to pick up a six per cent stake in the Iisco modernisation project.

It is important to point out at this juncture that the softening of stand by the finance ministry notwithstanding, the Iisco project will remain in limbo till the Cabinet is empowered once again to take such key policy decisions.The management of Iisco was taken over by the Union government by an Act of Parliament on July 14, 1972. The relinquishingof the government shares (subsequently transferred to SAIL) will require the approval of Parliament as well.

Meanwhile, SAIL has returned the Iisco assets it had taken over in January 1990, by a power of attorney granted by its subsidiary. The assets include Iisco's Kulti works, collieries, iron ore mines and the Chiria iron ore deposits, known to be the largest in Asia.